MoP Proposes Smart Pre-Payment Meters to Cut Late Payment Surcharges, Boost DISCOM Efficiency

The Ministry of Power (MoP) has recently proposed implementing smart pre-payment meters. The latest notification aims to assist states in preparing a roadmap for transitioning to smart pre-payment meters or pre-payment meters. This provision was brought based on each state’s progress in implementing pre-payment meters at the consumer level and follows the Ministry’s previous letters dated August 16, 2018, August 2, 2019, and August 7, 2020.

Now, MoP has issued a notification with the approval of the Hon’ble MoS (IC) for Power and NRE. It released this notification after securing feedback from states that have already implemented pre-payment meters. According to Central Electricity Authority (CEA) data shared last year, 45 companies provide smart electricity meters for India, and 12 companies provide the services of static net meters for the country. 

The latest notification will help reduce working capital requirements and enable DISCOMs to purchase electricity more cheaply from power exchanges, which they currently struggle to do due to financial constraints. It would also eliminate the burden of the late payment surcharge, which is currently as high as 18%. This surcharge is substantial in some states. Eliminating it could support DISCOMs in improving infrastructure and providing 24x7 reliable power to all consumers.

No connection To Be Given Without A Meter

Some previous provisions have mandated the setting up of an electricity connection with a smart pre-payment meter or pre-payment meter. The relevant provision is reproduced below: "No connection shall be given without a meter, and such meter shall be a smart pre-payment meter or pre-payment meter. Any exception to the smart meter or pre-payment meter shall require prior approval from the Commission. The Commission, while granting such exceptions, shall record proper justification for allowing the deviation from the installation of the smart pre-payment meter or pre-payment meter."

Accordingly, the MoP requires DISCOMs to implement these provisions without seeking specific approval from the State Commission. MoP has requested states to prepare schemes for switching to smart pre-payment meters or pre-payment meters in a time-bound manner to avail funds from the Government of India under this scheme. Plans should be submitted to the Ministry within two months of the date of this letter.

Additionally, the regulation also mandates that no connection be provided without a meter, and such a meter has to be a smart pre-payment meter or a pre-payment meter. Any faulty meter would be replaced only with a smart pre-payment meter or a pre-payment meter. It also mandates that existing post-paid meters should be replaced within three years.

Key Benefits

1. Bring 1.5% to 2% Rebate on Power Purchase Cost

DISCOMs will be able to pay GENCOS, transmission companies, and trading companies in advance, thereby securing a rebate of around 1.5% to 2% on power purchase costs. Timely or advance payments will reduce working capital requirements for generating and transmission companies, which may also result in lower tariffs.

2. Support Cost Savings from Eliminating Physical Billing

Pre-payment meters will remove the need for serving physical bills. This will reduce irregular billing, particularly in rural areas, where meters are often not read regularly and bills may be issued quarterly, half-yearly, or even annually. Such irregularities lead to cumulative dues that rural consumers find difficult to pay on time, compounded by late payment surcharges. Pre-payment meters allow consumers to pay conveniently and in smaller amounts, according to their payment capacity.

3. Support for Reform-Based, Result-Linked Power Distribution

In the Union Budget 2021-22, the Hon’ble Finance Minister announced a reform-based, result-linked power distribution sector scheme with an outlay of ₹3,05,984 crore over five years. The scheme assists DISCOMs for infrastructure development, including pre-payment smart metering, feeder separation, system upgrades, and other improvements tied to financial performance. Approximately ₹1,50,000 crore has been earmarked specifically for pre-payment meters.